California's High-Speed Rail Project Faces Critical Crossroads as Federal Funding Under Threat

Federal review threatens $4 billion in funding while costs soar past $100 billion for scaled-back Central Valley segment

By [Reporter Name] | June 6, 2025

California's ambitious high-speed rail project stands at a critical juncture as the Trump administration moves to withdraw $4 billion in federal funding, leaving the nation's largest infrastructure project scrambling to address mounting cost overruns and persistent delays that have plagued the effort for nearly two decades.

Federal Funding Crisis Deepens

The U.S. Department of Transportation released a scathing 310-page report this week, with Transportation Secretary Sean Duffy declaring that the California High-Speed Rail Authority "has no viable path to complete this project on time or on budget." The federal government has given California 37 days to respond before funding termination becomes final.

Federal Railroad Administration Acting Administrator Drew Feeley wrote that what was envisioned as an 800-mile system connecting the state's major cities has been reduced to a blueprint for "a 119-mile track to nowhere." After a $4 billion federal investment, the California agency "has conned the taxpayer ... with no viable plan to deliver even that partial segment on time," Feeley wrote.

The threatened withdrawal represents a devastating blow to a project that has relied heavily on federal support. Since 2009, more than $6.8 billion in federal funding has been committed to the project, making up 23% of the funds, while the state has committed to $22.5 billion, or 77% of the funds.

Ballooning Costs and Persistent Delays

Originally sold to voters in 2008 with promises of connecting San Francisco to Los Angeles by 2020 at a cost of $33 billion, the project has seen its timeline and budget explode. The entire San Francisco to Los Angeles line will now cost an estimated $106 billion to finish and officials hope to complete it in the next 20 years if there is money.

Currently, officials are focused on a drastically scaled-back 171-mile "Initial Operating Segment" connecting the Central Valley cities of Merced and Bakersfield. The 171-mile segment between Merced and Bakersfield will be the first part of the line to be operational, with services expected to start between 2030 and 2033. Of that section, 119 miles are currently under construction.

Even this reduced scope faces significant financial challenges. Full funding for the IOS remained uncommitted, with an up to $7 billion budget gap. The Inspector General has determined that the IOS was unlikely to be operational by 2033, casting further doubt on the project's viability.

Limited Construction Progress

Despite years of work and billions invested, actual infrastructure progress remains modest. As of January 2025, 119 miles (192 km) of the 171 miles (275 km) were under active construction. 22 miles (35 km) of contiguous guideway were declared complete, making that section ready for track-laying.

Initial track work is estimated to begin by Spring 2025, with installation of mainline turnouts, work that includes laying a siding track, a parallel track that allows BNSF trains to pull off the mainline and out of the way of the work.

The authority has completed significant preparatory work, including more than 50 major structures and created more than 15,000 construction jobs, but critics point out that no operational track has been laid after nearly two decades of development.

New Leadership Faces Mounting Challenges

The project's troubles come as new CEO Ian Choudri, appointed in August 2024, attempts to revitalize the troubled initiative. With over 30 years of experience in the transportation sector, including work on high-speed rail projects in France and Spain, Choudri is set to lead the authority at a critical juncture.

Choudri is transforming the organization's culture to focus on results while eliminating overlapping roles and responsibilities. He is also going over all of the project's existing plans with a fine-toothed comb in order to reduce costs while also examining strategies to raise additional revenues. That includes potential monetization of surplus real estate, fiber networks and advertising space.

The new CEO faces the immediate challenge of responding to federal criticism. The authority "strongly disagrees" with the report, a spokesperson told CNBC. Noting that most of the project's funding is provided by the state of California, the authority spokesperson says the group plans to "correct the record" in its response to the Federal Railroad Administration.

State Budget Pressures Mount

Beyond federal funding threats, the project faces increasing pressure from California's own budget constraints. The state is grappling with a $12 billion budget deficit, raising questions about continued support for the rail initiative.

The High Speed Rail Authority also gets 25% of its funding from the state's cap-and-trade program, designed to limit emissions by creating a market for tradable emissions credits. That funding varies from year to year and could be on the chopping block.

Governor Gavin Newsom's budget proposal includes $1 billion annually over the next 20 years to complete its initial operating segment, but critics question whether the state can sustain such commitments given competing budget priorities, including wildfire prevention and other infrastructure needs.

Political Opposition Intensifies

The project faces fierce opposition from Republican lawmakers and the Trump administration. Republican Rep. Kevin Kiley, who represents 3rd Congressional District that stretches alongside much of the state's border with Nevada and includes Sacramento's northeastern suburbs, called the California high-speed rail "the worst public infrastructure failure in U.S. history."

"There is no plausible scenario where the cost to federal or state taxpayers can be justified. It is past time to stop throwing good money after bad, and we must formally end this project," said Kiley, who introduced a bill earlier this year to make the project ineligible for further federal funding.

President Trump has taken personal interest in the project's investigation, stating that he has "never seen anything to this extent—the train that's being built between Los Angeles and San Francisco" in terms of mismanagement.

Uncertain Future

The project's supporters argue that despite setbacks, California remains committed to the transformative potential of high-speed rail. A poll this month conducted by Emerson College found that 54% of Californians say the high-speed rail project is a good use of state funds.

However, the combination of federal funding threats, budget shortfalls, and political opposition creates an uncertain environment for the project's future. Choudri's goal within the next 20 years is to build to Gilroy, about 70 miles (113 kilometers) southeast of San Francisco, a far cry from the original vision of connecting the state's major metropolitan areas.

As California responds to the federal ultimatum in the coming weeks, the fate of what was once promised to be America's first true high-speed rail system hangs in the balance, serving as a cautionary tale about the challenges of executing large-scale infrastructure projects in the United States.

SIDEBAR: Corporate Winners and Losers

How California's High-Speed Rail Has Impacted Private Sector Partners

The troubled California High-Speed Rail project has created a complex web of business relationships involving billions in contracts for construction, engineering, and consulting firms. While some companies have benefited from steady revenue streams, others have faced significant financial strain from cost overruns and delays.

Construction Contractors: Mixed Fortunes

Tutor Perini Corporation emerged as the most prominent beneficiary and victim of the project's dysfunction. The California-based firm leads a joint venture with Zachry Construction and Parsons that won the $985 million Construction Package 1 contract in 2013. However, the contract has since ballooned to $2.4 billion through 383 approved change orders, with Tutor Perini seeking an additional $600 million in 2021.

The project has put enormous strain on Tutor Perini's finances. The company has violated bank loan covenants multiple times, required debt waivers, and seen its balance sheet deteriorate from "pristine to highly indebted" over five years. Financial analysts have noted a concerning pattern of accounting profits coupled with cash flow losses.

Dragados USA and Flatiron Construction joint venture won Construction Package 2-3 with a $1.2 billion bid that came significantly below the $1.5-2.0 billion expected by Authority staff. Like Tutor Perini, Dragados has faced significant cost escalations and is working slower than projected, with completion now expected around 2025-2026.

Engineering and Consulting: Steady Revenue Streams

The project has been a financial boon for major consulting firms, though it has also created dependencies that concern oversight experts.

WSP (formerly Parsons Brinckerhoff) holds the largest consulting role through a $700 million Rail Delivery Partner contract running through 2022. WSP alone has about 470 employees on the project and leases much of the office space at rail authority headquarters, while also providing proprietary software and data servers. The firm developed the original $33 billion cost estimate in 2008 that has since tripled.

HNTB Corporation has benefited from multiple contracts, including serving as prime consultant and project construction manager for Construction Package 4. The firm's CEO Ian Choudri was recruited to lead the rail authority in 2024, highlighting the revolving door between consultants and the agency.

Other major beneficiaries include:

Jacobs Engineering: $1.2 billion design services contract
Arup, T.Y. Lin International, Foster and Partners: Design and engineering services
PGH Wong Engineering, Harris & Associates, Arcadis: Regional construction oversight

Small Business Participation

The project has emphasized inclusion of small, minority, and women-owned businesses as subcontractors, creating opportunities for hundreds of smaller firms across California's Central Valley. The authority reports that 875 small businesses have been involved in the project.

Industry Concerns

The project's management structure has drawn criticism from infrastructure experts. Oxford professor Bent Flyvbjerg, who studies mega-projects globally, warned: "If you depend on consultants to know what you are doing, then you are in real trouble". The rail authority now has 180 employees compared to hundreds of consultants, with WSP's Gregory Kelly acknowledging the need for a "realignment" of responsibilities.

Financial Ripple Effects

The project's delays and cost overruns have created broader industry impacts:

Tutor Perini reported revenue and income declines partly attributed to high-speed rail delays
Construction teams face work slowdowns during peak freight shipping seasons and lengthy approval processes with freight railroads
Contractors average significantly lower monthly billing rates than projected, extending completion timelines

The project's financial instability continues to affect contractor relationships, with firms submitting hundreds of millions in additional change orders while the state faces budget constraints and potential federal funding cuts.

SIDEBAR: Where Did the Money Go?

Tracking $15+ Billion in Spending on California's High-Speed Rail

From January 2015 to December 2023, a total of $11.2 billion had been spent on the IOS – which has 119 miles (192 km) under active construction – and on upgrades to existing rail lines in the San Francisco Bay Area and Greater Los Angeles, where Phase 1 is planned to share tracks with conventional passenger trains.

Major expenditures include:

Infrastructure and Construction:

More than 50 major structures completed, including viaducts, overpasses, and underpasses
The Hanford Viaduct, started in 2020, expected completion by 2026
18 grade separations completed
22 miles of contiguous guideway declared complete and ready for track-laying

Land and Legal Costs:

99% of right-of-way parcels delivered for the Merced to Bakersfield segment
Extensive use of eminent domain for land acquisition
Legal battles and environmental compliance costs

Economic Impact:

Nearly 15,000 construction jobs created
$21.8 billion in total economic output generated
$8.3 billion in labor income
875 small businesses involved

Preparatory Work:

Environmental clearance obtained for the full route connecting San Francisco and Los Angeles
Electrification of Caltrain completed in September 2024
Design and engineering work across multiple segments

Why Costs Ballooned:

1. Scope Changes and Delays

Original timeline of completion by 2020 missed by over a decade
Shift from full San Francisco-to-Los Angeles line to scaled-back Central Valley segment
Multiple missed deadlines and project milestone failures

2. Complex Geography and Engineering

Need for extensive tunneling through major mountain passes
Tehachapi Pass section requiring nine shorter tunnels and several viaducts more than 200 feet high
Challenging terrain requiring costly engineering solutions

3. Regulatory and Legal Challenges

Years of environmental review processes
Legal challenges from property owners and agricultural interests
Compliance with multiple federal and state regulations

4. Inflation and Market Changes

Construction cost inflation over nearly two decades
Supply chain disruptions and labor cost increases
Market volatility affecting material costs

5. Management and Oversight Issues

Poor planning and inadequate project management cited by federal review
Overlapping roles and responsibilities within the authority
Lack of adequate time and money to complete the project as promised

Sources

1. Associated Press. "Trump administration takes aim at $4B in funding for California high-speed rail." March 4, 2025. https://apnews.com/article/california-high-speed-rail-trump-investigation-5b4d6494a8cdd9a3fe3b8949bb5b1bba

2. Associated Press. "Trump administration signals it will slash funds for long-delayed California high-speed rail project." June 4, 2025. https://apnews.com/article/california-high-speed-rail-fra-newsom-trump-4d51cf236cb0b65ddbec7b49d4155a72

3. Wikipedia. "California High-Speed Rail." Updated June 2025. https://en.wikipedia.org/wiki/California_High-Speed_Rail

4. Railway-News. "California High-Speed Rail Provides 2025 Project Update." March 17, 2025. https://railway-news.com/california-high-speed-rail-provides-2025-project-update/

5. ABC10. "California's High Speed Rail Project: Current status, updates." 2025. https://www.abc10.com/article/news/local/california-high-speed-rail-project-current-progress/103-5c1b6a27-8aa1-4ad2-a4f2-e23921714805

6. Newsweek. "How California's High-Speed Rail Line Will Advance in 2025." December 25, 2024. https://www.newsweek.com/how-california-high-speed-rail-line-will-advance-2025-2004792

7. CalMatters. "New plan to accelerate California high-speed rail construction deserves attention, support." April 9, 2025. https://calmatters.org/commentary/2025/04/plan-accelerate-high-speed-rail/

8. ABC7 Los Angeles. "Trump administration to pull $4 billion from California high-speed rail funding." June 5, 2025. https://abc7.com/post/trump-administration-pull-4-billion-california-high-speed-rail-funding/16656635/

9. KCRA 3. "Trump administration to block billions in funding for California's high-speed rail." June 5, 2025. https://www.kcra.com/article/trump-block-california-high-speed-rail-funding/64968811

10. CNBC. "Trump administration threatens to pull $4 billion from California high-speed rail project." June 4, 2025. https://www.cnbc.com/2025/06/04/duffy-trump-california-high-speed-rail.html

11. Reuters. "US opens probe into whether to rescind $4 billion in California high-speed rail grants." February 20, 2025. https://www.reuters.com/business/autos-transportation/us-opens-probe-into-whether-rescind-4-billion-california-high-speed-rail-grants-2025-02-20/

12. CalMatters. "Should California's climate budget pay for high speed rail and firefighters?" May 2025. https://calmatters.org/environment/climate-change/2025/05/california-governor-climate-budget-cap-trade-high-speed-rail/

13. CBS Los Angeles. "Trump administration to review California's high-speed rail funding." February 21, 2025. https://www.cbsnews.com/losangeles/news/transportation-secretary-review-federal-spending-california-high-speed-rail-project/

14. U.S. Department of Transportation. "U.S. Transportation Secretary Duffy Announces Review of California High-Speed Rail Project." February 20, 2025. https://www.transportation.gov/briefing-room/us-transportation-secretary-duffy-announces-review-california-high-speed-rail-project

15. Global Railway Review. "California High-Speed Rail Authority appoints new CEO." August 9, 2024. https://www.globalrailwayreview.com/news/176521/arriva-rail-london-trials-bsl-access-solution-overground-passengers/

16. Newsweek. "California High Speed Rail Update Shared by New CEO." February 4, 2025. https://www.newsweek.com/california-high-speed-rail-ceo-update-challenges-spending-wisely-2025935

This story is developing. Additional reporting will follow as California submits its response to federal authorities.

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